The deficit that wouldn't die

The Orange County Register

Friday

Nov 20, 2009 at 6:47 AMNov 20, 2009 at 6:49 AM

Only last July the state budget was balanced with cuts in "essential" public services, by agreeing to sell high-priced assets, after deciding to switch money from one account to another and by planning to fill remaining gaps with Washington handouts.

That fix didn't last long. Legislative Analyst Mac Taylor said Wednesday that the state faces a nearly $21 billion combined deficit for the remainder of 2009-10 and the following fiscal year. Taylor bluntly warned it's likely to get worse. "Additional court cases threaten to drive our identified budget problems even higher," Mr. Taylor reported in his annual budget outlook.

Despite intentions, the state didn't save billions of dollars on prison and Medi-Cal spending. Contrary to the plan, the state didn't raise $1 billion by selling the State Compensation Fund. The state also couldn't transfer $800 million to the general fund from transportation accounts when a court ruling blocked that questionable move. The situation was aggravated further by a nearly $1-billion increase in K-14 education spending forced by the Prop. 98 formula dictating school finances.

Even accelerated withholding of Californians' income taxes that began this month won't offset the huge deficit. All-time-high increases in sales, income and car taxes earlier this year won't, either. A solution won't be easy or painless, Mr. Taylor said. "Addressing this large shortfall will require painful choices – on top of the difficult choices the Legislature made earlier this year," he wrote.

Compounding years of irresponsible spending have been years of persistently overly optimistic revenue projections. But the recession has reduced tax receipts even more. Additionally, the budget squeeze will tighten considerably when the temporary tax increases approved in January expire at the end of 2010-11, Mr. Taylor said.

The Legislature should act early because delays mean missed opportunities for saving, he advised. Moreover, he called for long-lasting solutions rather than more short-term fixes, the tactic of recent years.

While Mr. Taylor alluded to a need for spending cuts, he apparently is akin to those reflexively seeking new ways to increase revenue, including "aggressively seek(ing) new federal assistance."

Extracting more money from the private sector is economically counterproductive. Further reliance on Washington is also ill-advised, especially considering that such help carries mandates for more state spending, which Mr. Taylor acknowledged.

It may never be clearer that a budget bloated with unnecessary, irresponsible spending can be saved only by reducing that spending.

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